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01/11 10:58
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals several negative factors: decreased margins, increased costs, and a decline in net earnings. The Q&A highlights uncertainties in North America and lack of clarity on growth potential. Despite some growth prospects in South America, the lack of positive guidance and weak performance in the U.S. contribute to a negative sentiment. Additionally, the management's evasive responses to critical questions further undermine confidence.
Revenue $226.6 million, up 20.8% from the prior quarter and 19.3% from $190 million over the same period last year. Growth driven by strength in South and Central America, particularly Peru, partially offset by Australasia due to unexpected modifications to drill programs.
Adjusted Gross Margin Percentage 25.2% for the quarter compared to 28.9% from the same period last year. Decrease due to competitive environment in North America and mobilization costs for new projects.
G&A Costs Increased by $3.2 million compared to the same quarter last year due to the addition of Explomin and annual inflationary wage adjustments.
EBITDA $32.1 million compared to $34.3 million in the prior year period. Decrease attributed to factors like competitive environment and mobilization costs.
Net Earnings $10.1 million or $0.12 per share compared to $15.9 million or $0.19 per share for the prior year period. Decline due to lower margins and increased costs.
Net Debt $2.8 million, with working capital growing by $13.1 million to $206.8 million, driven by increased receivables from ramp-up in activity levels.
CapEx Spending $14.4 million, lower than expected due to strategic relocation of drill rigs and prior investments in the fleet.
Fleet Utilization 50% overall utilization with 709 total drills. Specialized drills at 46%, conventional drills at 50%, and underground drills at 54% utilization.
Revenue Composition by Drilling Type Specialized work accounted for 60% of total revenue, conventional drilling 14%, and underground drilling 26%. Growth in underground drilling aided by Explomin acquisition.
Revenue Composition by Commodities Gold represented 41% of revenue, copper 34%, and iron ore 11%. Growth driven by high gold prices and strength in South and Central America.
New drill rigs and support equipment: Added 5 new drill rigs and support equipment while disposing of 4 older rigs, bringing the total rig count to 709.
Geographic performance: Strong growth in South and Central America, particularly Peru and Chile, offset by softness in Australasia and challenges in North America due to forest fires and permitting delays.
Commodity revenue: Gold accounted for 41% of revenue, copper 34%, and iron ore 11%, showcasing diversity in commodities.
Revenue growth: Achieved 21% revenue growth over the last 3 months, with Q1 revenue at $226.6 million, up 20.8% from the prior quarter.
Fleet utilization: Overall fleet utilization at 50%, with specialized drills at 46%, conventional drills at 50%, and underground drills at 54%.
Operational leverage: Positioned to unlock operational leverage due to prior investments in infrastructure and equipment, with no significant incremental CapEx needed.
Explomin acquisition impact: Peru's revenue run rate increased following the Explomin acquisition, contributing to long-term contracts and stable revenue streams.
Strategic relocation: Drill rigs were strategically relocated to regions with higher demand, improving utilization and efficiency.
Delayed Mobilizations: The company experienced a slower start to the calendar year due to delayed mobilizations, which could impact revenue and operational efficiency.
Australasian Market Softness: Temporary softness in the Australasian market caused by changing exploration plans led to reduced activity levels, potentially affecting revenue from this region.
North American Market Challenges: The North American market faced forest fires, permitting delays, and elevated competition, which impacted activity levels and margins.
Foreign Exchange Impact: Unfavorable foreign exchange translation impacted revenue by approximately $1 million, though the effect on net earnings was minimal.
Decreased Margins: Gross margins decreased from 28.9% to 25.2% due to competitive pressures in North America and mobilization costs for new projects.
Inflationary Pressures: General and administrative costs increased due to inflationary wage adjustments, adding to operational expenses.
Junior Financing Constraints: Junior financings remain below prior cycle levels, limiting revenue growth opportunities from this segment.
Revenue Growth: The company expects top-line momentum in Q2, driven by additional projects, particularly in the South American region. Peru's revenue run rate is anticipated to continue growing due to the acquisition of Explomin and the addition of long-term contracts.
Regional Outlook: Optimism for North America is noted as the junior financing market shows signs of recovery, and streamlined permitting processes in Canada and the U.S. are expected to increase activity. South America, particularly Peru, is expected to see stable and diversified revenue growth.
Commodity Trends: Gold prices have reached record highs, and the outlook for copper and other base metals remains strong. Elevated commodity prices are expected to support further growth in exploration budgets as mining companies address reserve depletion.
Capital Expenditures: No significant incremental capital expenditures are anticipated due to prior investments in infrastructure and equipment, allowing the company to leverage operational efficiencies as demand grows.
Operational Leverage: The company is positioned to unlock operational leverage as activity scales up, supported by a well-maintained fleet, solid inventory levels, and strong safety and performance metrics.
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The earnings call reveals several negative factors: decreased margins, increased costs, and a decline in net earnings. The Q&A highlights uncertainties in North America and lack of clarity on growth potential. Despite some growth prospects in South America, the lack of positive guidance and weak performance in the U.S. contribute to a negative sentiment. Additionally, the management's evasive responses to critical questions further undermine confidence.
The earnings call presented mixed signals: a strategic shift away from China led to reduced sales there, but overall revenue increased sequentially. Gross profit improved YoY, but operating expenses rose sequentially. The Q&A revealed optimism about edge AI growth and a stable gross margin outlook, yet management's vague responses on key metrics and timelines dampened sentiment. Despite some positive financial metrics, the lack of clear guidance and ongoing losses suggest a neutral stock price movement over the next two weeks.
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